Why Invest ?
Before answering this question, we need to know what will happen if a person chooses not to invest and what changes will be seen in their finances if they choose to invest in the long run. Let’s consider an example to look into this:
Before answering this question, it is important to understand the potential consequences of choosing not to invest and the financial changes that can occur in the long run if one decides to invest. Let’s explore this further by considering an example:
Let us assume you earn Rs 60,000/- per month, and after deducting all expenses, your monthly saving is approximately Rs 30,000/-. Now consider two situations:
Case 1: Suppose your current age is 30 years old and you plan to retire when you are 50 years old. This will give you 20 more years to earn. If you save Rs 3,60,000 a year, then your total savings after 20 years will be Rs 72,00,000.
Case 2: Now, in a different scenario, you are investing Rs 30,000/- in a scheme in which you are getting a return of 10%. Considering if you plan to retire at 50, your total savings after 20 years will be Rs 2,29,70,907, an astounding number of almost 2.3 crores, almost 3 times the regular amount.
Comparing both cases, we can see that investing gives you a huge corpus amount as compared to the non-investment option.
Now, coming back to our original question, why invest? The answer to this question is quite simple: investments help you achieve your life goals, whether short-term or long-term. It varies from person to person, and since goals are personal for each one, there is no one-size-fits-all investment plan. You have to figure out the investment plan for yourself and create an investment plan accordingly.
Reasons to consider investing:
The primary motive behind investing money is to generate wealth. By investing, not only can you secure your and your family’s financial situation, but you can also meet your short and long-term life goals, like buying your first home, your children’s higher education, and building your retirement fund, to upgrade your current lifestyle.
Investing your money can have many benefits, including creating wealth, but it’s not the only reason to do so. Apart from this, there are some other reasons why you would like to invest your money:
- Achieve life’s financial goals: To meet life’s short and long goals like buying your dream car, buying a home, starting your own business, etc. By investing, you can meet your financial objectives without incurring any debt whatsoever.
- Retirement Goals: You can provide yourself and your partner with a financially secure post-retirement life by regularly investing your savings in a retirement-friendly scheme.
- Emergency Needs: You never know when an emergency will come, but it’s always best to be prepared for this kind of situation. It’s always advisable to have a set of investments that act as a contingency fund, so you can use them in case of any unforeseen financial emergencies. During the COVID period, many people were fired from their jobs for almost months, and emergency funds during this time acted as a cushion for a peaceful life.
- To deal with inflation: We know that the cost of living is constantly on an upward trend, irrespective of where you live or where you work. With inflation, not only does the value of money drop, but the cost of goods to be purchased is also rising significantly. In such a situation with just your savings, it will be tough for you to sustain your current lifestyle as the years go by. By investing, one can deal better with the inevitable—the growing cost of living.
- To reduce the burden of taxes: By simply investing money in the right instruments, you can also lower your tax burden. Financial instruments like PPF (Public Provident Fund), ELSS (Equity Linked Savings Scheme), and LIC give you a variety of tax exemptions. Another reason to invest your money.
Conclusion:
Now you know why investment is necessary. Now we can move on to the next big question: “When to Invest?” and “Where to Invest?”
